Gold – Daily Chart

We have turned bearish again and will remain so while below trading the 1434.05 August high

Over the past few month the gold price has risen in three corrective Elliott abc waves which have most likely culminated at the 1434.05 August high.

Therefore, while no daily chart close above this high is being made, we expect the gold price to fall back to an beyond this year’s 1180.04 June low. This level could be reached by the end of this year or the beginning of next year.

Our first downside target is the 1349.31/1315.74 support area which consists of the July high, April and May lows and the 55 day moving average. Below it lies the 1272.56 August low which is also being targeted.
Failure at the 1272.56 August low would confirm that another interim top has been formed. In such a scenario the 1200/1100 region would be back in play instead.
Above 1434.05 sits resistance at 1440.20/1441.11.
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FX Week

September event risk looms

September will bring a lot of event risk for financial markets to absorb, with the decision by the Fed over tapering QE being the most significant event during the month, and arguably for the rest of the year. Ahead of it this week’s August US non-farm payrolls report will be a crucial staging point in determining what the Fed is likely to do. The ECB and the BOE also have critical policy meetings this week, with the credibility of their ‘forward guidance’ policies coming under scrutiny recently. Germany also faces its election on the 22nd September, and although the outcome is looking less and less in doubt, with a Merkel victory expected by most, the post-election Eurozone environment may present new pressures heading into Q4 and towards the end of the year. On top of all of this the US also faces the prospect of another fiscal deadlock towards the end of the month. However, all of these issues are currently taking something of a backseat to events in Syria, with speculation that the US will launch missile strikes soon keeping markets on tender hooks, unsure about the length of US involvement in the conflict there and nervous about the longer term consequences.

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USD/TRY – Daily Chart

Made a new all-time high at 2.0728 while en route to the 2.0922/2.1000 region

USD/TRY so far made a new all-time high at 2.0728.
The 100% Fibonacci extension of the April-to-July rise, projected higher from the July low, at 2.0922 is a potential upside target, together with the psychological 2.1000 level. Around this level the current advance may stall.
If not, the 161.8% Fibonacci extension at 2.2115 will be in focus.
Support is seen around the 2.0000 mark and then at the 1.9734 July high.
We will remain bullish while the currency pair stays above the 1.8992 July low.
We will retain our longer term bullish forecast while USD/TRY remains above its June low at 1.8503.
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NZD/USD – Daily Chart

Continues to slide towards the .7699/61 support zone which should eventually give way

NZD/USD continues to come off its.8164 current August high and is still declining towards the .7699/61 support area. It contains the three month and 2011-13 support line and several daily lows seen since June. This support area is expected to hold for a few days when reached.

Once fallen through, our medium term downside target zone, made up of the .7456/.7371 May 2012 low and November 2011 low, will be in focus. It will remain our downside target for the months to come but will only be properly back on the map once the June low at .7683 has been fallen through.
Minor resistance above the 55 day moving average at .7899 and the 50% retracement at .7923 comes in around the 38.2% Fibonacci retracement at .7980. More significant resistance can be seen at the July and current August highs at .8107/64. While trading below the latter, our bearish view will be maintained.
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USD/CAD – Daily Chart

Is expected to reach the 1.0608/75 resistance area and targets the 2010 peak at 1.0850

USD/CAD once again flirts with the 78.6% Fibonacci retracement of the July decline at 1.0531 and is about to reach the 1.0608/75 resistance area (July 2013 high, July and August 2010 highs and the 2011 peak). This is likely to cap in the short term but should eventually be overcome.

Another potential longer term upside target can be seen around the 2010 peak at 1.0850, made in May of that year.

Slips should either find support around the 61.8% Fibonacci retracement at 1.0470 or between the 1.0444 early August high and the 1.0420 May peak.
Only unexpected failure at the 1.0247 July low would void our bullish forecast and lead to the 2012-13 support line at 1.0157 being eyed instead. This we do not expect to happen.
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EUR/PLN – Daily Chart

Still tries to reach the 55 day moving average at 4.2607 and then the 4.35/37 region

Last week EUR/PLN spent its time below the 55 day moving average at 4.2607 which it is still trying to reach.
We believe that the June-to-August consolidation phase has ended and that the currency pair is once again heading towards the 4.35/37 region in which the June and July highs were made.
First the 55 day moving average and the current August high at 4.2607/58 will need to be overcome.
Once this has happened the 50% retracement of the June-to-August descent at 4.2757 and then the 61.8% Fibonacci retracement at 4.2982 will be in focus for the days ahead.
We will retain our once again bullish forecast while the currency pair stays above its 4.1807 current August low on a daily closing basis. Minor support above this level comes in around last week’s 4.2208 low.
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Gold – Daily Chart

Has reached the 1400/1425 resistance area which we expect to cap

The gold price has reached the 1400/1425 zone as expected but we believe that it will soon begin to struggle.

We will retain our longer term bearish forecast while the gold price remains below the 1424.05 June high on a daily chart closing basis. This is expected to be the case since we are currently in the fifth minor up wave from the June low.
The current corrective rally higher should be followed by another decline back to the 1300/1250 region.
For this to happen a decline to below the 1352.20 August 20 low will have to be seen, however.
Failure at the current 1272.56 August low would confirm that another interim top has been formed. In such a scenario the 1200 region would be back in play instead.
Above 1425 sits resist ance at 1440.20/1441.11.
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FX Alpha

Give me the money

EUR-USD remains above 1.33 due to doubts about ECB ́s forward guidance and disappointing US data. The fact that further aid for Greece has reached the German election campaign is unlikely to pressure the cross. However, due to the impressive return of EUR longs the downside seems vulnerable.

The FX market did not really take the ECB’s forward guidance seriously and there are increasing doubts about an imminent Fed tapering following the latest disastrous US macro data (new home sales, durable goods orders). Against this backdrop EUR-USD continues to trade above 1.33 even though it is still obvious that the two most important central banks will soon move into opposite directions. Is it possible that EUR-USD will now come under pressure on a different front? The debate about further aid for Greece is certainly gathering momentum and has also reached the German election campaign after German finance minister Wolfgang Schäuble mentioned a third aid package. While another aid package is pretty likely, most of the finance ministers are opposing a renewed haircut due to concerns about the bond market reaction.
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USD/IDR 1 Month NDF – Daily Chart

Exploded to the upside and has so far reached 11493 below which it now consolidates

The USD/IDR 1 Month NDF has suddenly left its recent consolidation phase and so far shot up to 11493, a level last seen in April 2009 and which is located above the 61.8% Fibonacci retracement of the 2009-13 decline at 11133 (see the weekly chart on the following page).

Around the 11500 level the current rally may pause.

If not, the 78.6% Fibonacci retracement at 11862 and the April 2009 peak at 11975 will be back in focus.

Good support is now seen between the 10566 June and the 10548 July highs.

Our long term bullish forecast will remain valid while the NDF trades above the 10080 July trough.

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FX Week

USD gains selective

Although the minutes of the July Fed meeting showed the majority of its members supporting a QE tapering by the end of the year, the markets still remain divided about whether it will happen in September or not, which is serving to keep the USD’s gains limited and relatively selective. USD strength is being seen against EM currencies, but in the developed world the reaction is more contained especially against the EUR which remains buoyed by improving Eurozone fundamentals. The August US jobs report looms next week as the next main catalyst for USD direction, but until then the markets are likely to remain subdued and USD gains quite gradual.

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Commodity Spotlight Energy

Unexpected supply shortfalls drive up price of Brent oil

The Brent oil price rose to a 4½ month high of USD 111.5 per barrel in mid-August. The price has been driven by a combination of production shortfalls and stronger demand. Despite a continuing abundant supply of oil production outside OPEC, the oil market has therefore narrowed, which is leading to an increase in Brent forward contracts with short-term maturities in particular. The price rise is also being boosted by growing interest from financial investors. That said, the potential increase should be limited by the fact that the supply situation looks set to remain comfortable in the medium term. We expect the price of Brent to increase to USD 112 by year-end and to USD 115 next year.

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USD/IDR 1 Month NDF – Daily Chart

Explodes to the upside and has so far reached 11492.5

The USD/IDR 1 Month NDF has suddenly left its recent consolidation phase and so far shot up to 11492.5, a level last seen in April 2009 and which is located above the 61.8% Fibonacci retracement of the 2009-13decline at 11133 (see the weekly chart on the following page).

Around the 11500 level the current rally may pause.
If not, the 78.6% Fibonacci retracement at 11862 and the April 2009 peak at 11975 will be back in focus.
Good support is now seen between the 10566 June and the 10548 July highs.
Our long term bullish forecast will remain valid while the NDF trades above the 10080 July trough.
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NZD/USD – Daily Chart

Has been rejected by this week’s .8164 high and targets the .7693/83 support zone

Last week NZD/USD briefly over came the .8139 June peak but did not manage to make a daily close above it.

Therefore, even though a near three month high was made at .8164, we will retain our medium term bearish forecast while the currency pair remains below .8164.
Our medium term downside target zone is still made up of the .7456/.7371 May 2012 low and November 2011 low. These remain our downside targets for the months to come but will only be properly back on the map once the current August low at .7693 has been fallen through.
Immediate downside targets are the 61.8% Fibonacci retracement of the August rally at .7867, followed by the 78.6% retracement at .7786 and the June 11 low at .7760.
Minor resistance comes in around the 38.2% Fibonacci retracement at .7980 and significant resistance at the July and current August highs at .8107/64.
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Sell Cross – JPY. ASAP

US yield developments are a bad omen for risky currencies. Positioning is still massively short JPY and will be subject to the mother of short squeezes.

Coming into September it is instructive to look at currency performance to see what dynamics are dominating within the G10 and EM space. Rather than simply following rate spreads, G10 currencies exhibit distinct signals of risk aversion. USD-JPY in particular fails to break higher despite the surge in US yields, gold enjoys an Indian summer and the USD is neither here nor there. Risky currencies, in particular EM currencies such as BRL and MXN continue to lose ground, despite the fact that the USD has not as yet staged its long awaited rally. Should the Fed decide to taper QE3 from September onwards this will arguably make a bad situation worse within the FX space.

US rates have already begun to price in Fed moves on the taper front, such that shorter dated yields remain well anchored in line with the Fed’s forward guidance policy, whilst the longer end of the yield curve has seen considerable moves, with US 30 year yields trading significantly higher over the last few weeks. These developments are likely to be a burden for risk assets in general meaning that safe haven currencies will likely benefit. Given that downside in EUR-CHF is capped this means that JPY should stand to benefit. More to the point, market participants are still resolutely short JPY meaning that should a down move in USD-JPY come to pass, investors will have to cover their shorts leading to an even more aggressive move.
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Gold – Daily Chart

Recent advance is likely to run out of steam around the 1400/1425 area

The gold price continues its rise from the June low at 1180.04 but is expected to run out of puff around the 1400/1425 zone.
We will retain our longer term bearish forecast while the gold price remains below the 1424.05 June high on a daily chart closing basis. This is likely to be the case since we are currently in the fifth minor up wave from the June low. The current corrective rally higher should be followed by another decline back to the 1300/1250 region.
Short term the gold price remains bullish, however, and could still reach the 1395.41 June 13 high as well as the minor psychological 1400 region this or next week.
For now unexpected failure at the current 1272.56 August low would negate our short term bullish outlook, however. In such a scenario the 1200 region would be back in play instead. This is not our favourite scenario, though.
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EUR/PLN – Daily Chart

We have changed our view to bullish; targets the 55 dma at 4.2637 and then the 4.35/37 region

Last week EUR/PLN levelled out slightly above the 200 day moving average at 4.1772 and has been accelerating higher since then.

We believe that the June-to-August consolidation phase has now ended and that the currency pair is once again heading towards the 4.35/37 region in which the June and July highs were made.
First the 55 day moving average and the current August high at 4.2637/58 will need to be overcome.
Once this has happened the 50% retracement of the June-to-August descent at 4.2757 and then the 61.8% Fibonacci retracement at 4.2982 will be in focus for the days ahead.
We will retain our once again bullish forecast while the currency pair stays above its 4.1807 current August low on a daily closing basis.
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EUR/GBP – Daily Chart

EUR/GBP’s reversal lower means that the August high at .8768 is another significant top

EUR/GBP made another significant top at .8768 in early August.

Last week’s drop through the .8582 July 23 low has confirmed the trend reversal.
EUR/GBP is currently heading back down towards the .8500 region and the 2012-13 uptrend line at .8497. Together with the June low at .8470 and the 200 day moving average at .8450 they should offer interim support.
Should this not be the case, the .8417/.8399 March/April and May lows will be back in the picture.
Minor resistance sits at .8580/83 (July 10 low and 55 day moving average) and further resistance at .8597, the May peak.
We expect to see a sell-off towards the 200 day moving average at .8450 being seen over the coming weeks now that the current August high at .8769 has been highlighted as a significant top.

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EUR/BRL – Daily Chart

Is surging higher and targets the 3.3487 October 2008 high and then the 3.40/47 region

EUR/BRL sharp ascent from its 2.5226 March low is accelerating to the upside with it so far having made a four and a half year high at 3.2284.

Next up is the October 2008 peak which was made at 3.3487. This level and the minor psychological 3.3500 level should be reached within the weeks to come.

Once overcome, the 3.4000 region will be back in the picture, together with the 3.4516/3.4738 December 2008 highs.
We will retain this bullish forecast while the currency pair remains above its 2.9986 August low.
Minor support above this level comes in around the 3.1013 August 8 high.
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FX Week

Summer ‘health warnings’ for FX

After threatening to break higher at the beginning of the summer the USD has fallen back in recent weeks, dampened by the signs of improving growth in the Eurozone, UK and China, as well as by the ongoing uncertainty about whether and when QE will begin being ‘tapered’ by the Fed. From appearing almost a ‘foregone conclusion’ in late June, there is still, even now, considerable uncertainty about whether a September FOMC ‘tapering’ will actually be announced. According to Bloomberg, 65% of global economists expect the Fed to begin tapering in September, no longer the near unanimity seen in late June. However, such negative effects on the USD we believe are also being magnified by issues of liquidity and the seasonal thinness of the FX market in the summer months. Usually we think it is sensible to apply a ‘health warning’ to the currency movements seen in July and August, and this year, we believe, is no exception.

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USD/JPY – Daily Chart

USD/JPY is ratcheting lower towards triangle support at 94.77

On Wednesday USD/JPY reached the 55 day moving average at 98.42 which capped it.
While the currency pair remains below the four month resistance line at 99.97, downside pressure should be maintained with the triangle support line at 94.77 being targeted.
Short term resistance above the 55 day moving average but below the resistance line is seen at the current August high at 99.95.
On the way down lurks the 78.6% Fibonacci retracement of the June-to-July rise at 95.42.
Over the coming weeks we al low for losses back to the 93.77/75 support area. This is where the 200 day moving average and the June low are to be found.
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